Dick and Mac McDonald ran a highly efficient burger joint.
It was the only restaurant they ran, and they might have continued to do just that if Ray Kroc hadn’t pitched the idea of deploying the McDonald’s business model to create similarly-run eateries across the U.S. Soon thereafter, Kroc bought out the McDonald brothers and the rest, as they say, is history.
So, are you more like Dick and Mac, concerned primarily with running the business you have? (Mac McDonald had no regrets about selling out to Kroc before the franchise became the iconic brand it is today.) Or, are you thinking more like Ray Kroc, that you can expand your business by franchising it?
Here are some key considerations to evaluate whether both you and your business fit a successful franchising model.
Related Article: Real Talk: Is Franchising As Profitable As You Think?
Can Franchising Grow Your Business?
According to the Small Business Administration, franchising is one most successful growth strategies for SMBs, in large part because you are mostly using other people’s money to build and expand your business, while still retaining control of your brand. Which isn’t to say you don’t have to invest in infrastructure, technology and training to develop a franchise distribution system.
But all of that is less costly than buying and opening new locations, hiring staff and managing them yourself. It’s what the franchise industry itself calls S.Y.S.T.E.M.—Save Yourself Time, Energy and Money.
Is Your Business Fit for Franchising?
While it is often said that almost any business can be franchised, your business must have certain characteristics to fit the franchise model.
Quickbooks lists a few:
- A track record of success. You’re not going to attract potential franchisees just with an idea. You have to demonstrate that the idea actually works and is profitable. The general rule of thumb is that a business must show at least two years of successful operation to consider expanding through franchising.
- A working business model—methods of operating, marketing, training—that is readily replicable. While McDonald’s provides its franchisees with raw materials and recipes, equally important are the systems in place to prepare and deliver the products in a consistent manner that provides customers with the same satisfying experience, regardless of franchise location.
- A proven brand identity that is unique. How you differentiate yourself in the marketplace determines whether potential franchisees want to associate themselves with your brand.
Related Article: Don't Mind the Hype: Avoid Getting Burned by a “Hot” Franchise
Is Your Personality Fit for Franchising?
While the whole point of franchising is to duplicate the systems and procedures that make your enterprise successful, there is a certain amount of “letting go” for entrepreneurs used to directly managing their business operation.
- Am I ready to hand off operations to individual managers who will represent my business, but run it somewhat independently of my direction?
- Do I have inspiring leadership skills? Dave Thomas of Wendy’s, for example, who was noted for visiting individual franchises to espouse best practices and “motivate the troops.”
- Do I have the resources to recruit potential franchisees, and train and support them?
- Can I put the needs of individual franchisees ahead of my own?
What’s Your Plan?
Identify the following:
- Which geographic areas represent the best potential to establish franchises?
- How will you recruit/identify potential franchisees? What financials will you require?
- What technologies, supply chain processes, quality control systems and other procedures are required to support franchise operations?
- What are you going to charge a new franchisee to open a business? What are you going to charge franchises to provide certain products/services?
- What are tax implications for your business? What about its earning potential?
Keep in mind that the key to franchising is not so much selling potential franchisees on the benefits of “buying” into your business model, but rather supporting your franchisees to ensure their individual success. It becomes less about making your company profitable and more about making your partners profitable. Of course, the more profitable your partners, the more successful your company.